Notes on the July 2019 U.S. Employment Situation

OVERVIEW

• Total non-farm payroll employment increased by 164,000 and the unemployment rate remained at 3.7 percent, according to the Bureau of Labor Statistics.  
• The Labor Force Participation (LFP) rate rose to 63.0 percent. The Employment-Population ratio also rose slightly to 60.7 percent. 
• Professional and Business Services (+31,000) and Health Care (+30,000) led all sectors in July.  
• Manufacturing added 16,000 jobs but the BLS reports employment “changed little in July and thus far in 2019.”
• Construction also changed little over the month
• Employment in other industries also did not change from June to July: Transportation and Warehousing, Wholesale Trade, Retail Trade, Information, Leisure and Hospitality and Government changed little. 
• Average hourly earnings rose by 8 cents to $27.98. Since July 2018 wages are up 3.2 percent. 
• In July, the average workweek for all employees decreased to 34.3 hours.  
• The number of persons employed part-time was declined in July to 4.0 million from 4.3 million). The number of long-termed unemployed (greater than 27 weeks) declined by 248,000 to 1.2 million and accounted for 19.2 percent of all unemployed. (The number for June was 23.7 percent.) 
• In July, 1.5 million persons were not in the workforce but wanted and were available for work and sought employment in the last year. This group is known as the “marginally attached to the labor force.”
• Revisions to the two previous months counted 41,000 less jobs than reported initially. May 2019 was revised from by 10,000 from +72,000 to +62,000 and June 2019 was revised down 31,000 from +244,00 to +193,000.

ANALYSIS

Today’s payrolls report came in slightly less than expectations. Wall Street expected 165,000, the BLS printed 164,000. Earlier this week, ADP estimated private jobs at 154,000, the BLS today said the private sector created 148,000 new jobs. Revisions to the previous two months dampened the job growth for the past few months. Today’s payroll number was in line with average job growth in the first six months. However, it is far below the 2018 average of 223,000 jobs per month.

Drilling down into today’s data was surge in computer systems design and related services. Employment in this sector increased by 11,000 jobs and “accounted for about one-third of employment growth in professional and technical services both over the month and over the year.”

The Labor Force Participation rate rose to 63.0 percent as more workers moved off the sidelines. Over the past 12 months, the number of part-time workers seeking full time work declined by 604,000 jobs. While those marginally attached to the workforce remained the same from one year ago, discouraged workers who don’t think jobs for them exist in the market are down by 144,000. Still, the participation rate has not reclaimed its pre-Great Recession levels (See Table A and Chart A). This is consistent across all racial groups on a non-seasonally adjusted basis.

Since 2006, the LFP rate for Whites is off by 2.5 percentage points; Blacks down by 0.8. It is down by 1.6 for both Asian and Latino workers. 

Workers who are participating are enjoying a raise: the average hourly earnings rose by 8 cents in July marking a 3.2 percent increase year-over-year.

Economists continue to pay attention to the job market as they debate interest rates. Today’s report comes two days after the Federal Reserve Bank cut interest rates. Despite the lower-than-expected payrolls number, some voting board members expressed dissent citing a 50-year low U-rate. Eric S. Rosengren, the Boston Fed President said, “I do not see a clear and compelling case for additional monetary accommodation at this time.” Rosengren’s colleague from the Minneapolis Fed, Neel Kashkari believes there is still slack in the jobs market; he sees less need to raise rates at all. 

Table A: LFP Rates for All Groups

Chart A: Trending Downward: Fewer Workers in Each Racial Group Participating in the Job Market